RBS economists have urged investors to sell everything except high-quality bonds, warning of a cataclysmic year ahead for the financial markets. In a memo to clients, the bank's European rates research team stated clients should be concentrating on return of capital, not return on capital, and that an ominous outlook to the world economy saying that it looks similar to 2008.
The Key Points in the note to RBS clients include:
- Bearish on China and global commodities.
- They predict oil could fall as low as $16 a barrel.
- The world has far too much debt to be able to grow well.
- Advances in technology and automation are set to wipe out up to half of all jobs in the developed world.
- Equities could fall 10% to 20%.
- It predicts the year will be spent focusing on how to exit positions that have benefited from long-running QE, including emerging markets, credit and equities.
Although RBS's note is particularly gloomy, it's not the first bank to kick off the year with a series of bearish predictions on the world economy:
- JP Morgan on Tuesday became the third bank to push back its forecast for the timing of a Bank of England rate rise, joining Goldman Sachs and Bank of America Merrill Lynch.
- Morgan Stanley wrote in a note on Monday that oil prices could fall a further 10% to 25% if the dollar continues to strengthen.
- Other major banks including Bank of America Merrill Lynch, Barclays, Deutsche Bank, Societe Generale and Macquarie have also cut their oil forecasts in the past week.
- Ratings agency Standard & Poor's has more companies on a negative outlook than at any time since the financial crisis.
All and all, not a very rosy outlook and one that has generated much discussion in print and social media.
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